IN DELOITTE Asia’s recent article “China’s Rise: Offshore acquisitions new frontier,” the world’s most populous country is continuing to keep its eyes peeled for quality M&A bargains abroad.
And helping China's cause is the fact that the global economic slowdown is actually having a countercyclical effect on the PRC's foreign firm shopping spree inertia as offshore enterprises are often starved for cash and even looking for potential buyers in some cases, China Finance News reported.
In the first three quarters of this year, Chinese firms had finalized 61 major foreign acquisitions totaling some 21.2 bln usd. Deloitte estimates that in 2010, China’s appetite for foreign firms will focus on energy, mining and utilities sectors, but that there would be new challenges venturing into these areas.
Following the transformation and revamping of financial sectors in the US and the EU on the back of the meltdown which began on Wall Street last year, China’s interest in buying distressed or bargain-priced financial assets in these markets may be peaked.
Sticking to stable overseas asset grab
Over the past decade or so of strong pre-crisis global economic growth, China has stood near the top of the major world economies by consistently reporting double digit GDP expansion nearly every quarter. Simultaneous with this envious performance has been China’s emergence as a force to be reckoned with on the offshore M&A front.
From 2003 to September of this year, Chinese firms participated in 437 major foreign acquisitions totaling 116.8 bln usd. Deloitte adds that these activities have steadily risen over the first three quarters of 2009.
Among them, China’s major buys of foreign assets reached a total of 61 deals totaling 21.2 bln usd, and that most of these signings were inked in the third quarter (26 deals/8.9 bln usd). The biggest of these was the 2.6 bln usd deal for Australian coal firm Felix Resources.
Deloitte said that despite the volume of total global cross-border acquisitions slowing following the subprime meltdown in the US, China’s buyout of non-Chinese assets has been bucking this trend and showed a steady rise.
However, China’s growing economic clout growing stockpile of foreign exchange (climbing over two TRLN usd!), the country is expected to be under more intense scrutiny when it goes shopping for what some governments might classify as trophy, iconic, or assets with national security implications.
In addition, foreign governments are beginning to question China when they come shopping for their firms with bulging wallets, asking Beijing whether their massive SOEs would also be saleable if non-Chinese suitors came knocking.
One only need look at the prickly reaction in the US four years ago when China was eyeing a takeover of California-based Unocal, and conversely, Beijing’s strong resistance to US interests taking a major stake in earth moving firm Xugong.
But sometimes, necessity breeds invention – or perhaps desperation is a better word.
It wasn’t long ago that IBM’s struggling PC unit was swallowed whole by Lenovo -- a feat which even the most insightful analysts and prognosticators would not have predicted even a few years prior.
And the recent buyout of the ultimate US muscle car – Hummer – by a Chinese SOE is an even more shocking example of just how universal (read “Chinese”) the global grab game is becoming.
It has some in the media even whispering of Beijing’s aspirations concerning the mighty -- and mightily struggling -- icon of US icons: GM.
Impossible? It wasn’t that long ago that Hummer was under GM’s umbrella…